How to Use a Blockchain for Wine Industry?
In 2017, the world wine market reached 300 billion dollars, while, according to expert estimates, every fifth bottle of wine in the world is fake, if it is French varieties - every third. For the global economy, this means a loss of 60 billion dollars, and for society - tens of thousands of deaths annually due to the use of low-quality counterfeit products.
Wine production can be divided into eight elements, depending on who is the main subject at one time or another in the product life cycle. The list of these subjects and a simplified model of their interaction are presented in the following figure:
This is the initial link in the sales chain, since wine production begins with vineyards. People who are professionally engaged in the cultivation and harvest of grapes are called winegrowers. They take care of the plants and control the growth parameters (humidity, acidity and soil compaction, temperature, etc.), and are also responsible for protection from weeds and insects.
Wine-filled packaging is sent to the retailer or distributor of finished products. The duties of the latter include the storage and shipment of finished packaged products to points of sale, as well as inventory management. To do this, the item is usually repackaged and remarked in large batches.
What needs to be reflected in the blockchain:
Data about the conditions of storage and transportation is important because, according to research, during transportation, 20% of wine deteriorates due to non-compliance with temperature regimes or excessive shaking - the longer the logistics, the greater these figures. And neither the ordinary buyer nor the expert will be able to understand what wine is spoiled until the bottle is opened.
The retailer receives finished products in the form of bottles, cans, barrels and cardboard boxes from the distributor of finished products or the wholesaler and sells them to final consumers. Retail is responsible for displaying in the network information about goods received, their storage and sale. The sale must be logged so that the same identification tag cannot be reused.
Adulteration of wine is the biggest problem of the industry. Large-scale wine producers spend millions of dollars annually on fighting counterfeit products, introducing protection means more efficiently than those used by the Federal Reserve to protect the American dollar.
For example, in April 2018, the world-famous producer of Bordeaux wines Grands Vins de Gironde was fined $ 500,000 for selling cheap table varieties under the guise of more expensive ones. This is a scandal, but it fades before the Rudy Kurniawan fraud, which managed to sell tens of thousands of bottles of counterfeit wine worth worth over $ 500 million.
Quality control. The two main factors that influence the quality of the wine are temperature and humidity. The ideal storage temperature is 10–12° C for strong wines and 14–16 ° C for dessert wines, and it should not fluctuate more than 3–5 degrees a day. Humidity is also important, since its optimal value (60–70%) does not allow the crust to dry out and prevents the growth of mold.
Blockchain allows you to fulfill this need by tracking important parameters throughout the life of a wine in real time. These data are recorded in the blockchain network and are provided to everyone, so that everyone can check the conditions of storage and transportation of the "solar drink".
Accessibility of information. On the usual bottle there is information only about the chemical composition of the wine and its manufacturer. This is clearly not enough to understand how safe, tasty or organic it is.
It will not remove all fraudsters from the market. Although the blockchain provides great opportunities to fight counterfeits, it is not able to stop all types of fraud. Thus, the distribution register will prevent the creation of several copies of the same wine, the substitution of expensive varieties for cheap, the sale of counterfeit goods and spoiled goods.
Other fraudulent schemes will remain. For example, you can take a bottle of expensive wine and replace its contents (popular in the restaurant business), you can still “find” a bottle of old expensive wine and sell it at auction. With such types of fraud can help the rating system and the escrow of funds. However, these are deterrent, rather than impeding factors.
It will not give 100% guarantees of authenticity of origin. Blockchain and smart contracts will make the market much more transparent and safer, but in an industry where the main customers are very rich people, anonymity is part of the game. Consequently, fraudsters will still be able to anonymously sell fakes and evade responsibility.
In fact, this means that fraudsters can always enter a market with a clean reputation, for example, by creating a new legal entity that is engaged in wholesale or retail sales. It is impossible to prevent this.
Cost estimation with blockchain. Let’s suppose you want to evaluate two bottles of Mouton-Rothschild of 2000, the origin of which is reflected in the blockchain. To do this, you take the bottle of wine to the appraiser; he uses the phone to scan the tags and see what the system has issued. In a public book, he sees that both tags were created in the same vineyard in one year, but one bottle was sold to a well-known collector, and the second to an unknown participant.
In this case, the appraiser may assume that the collector will relate to the transportation and storage of wine with the utmost responsibility. The conditions of transportation and storage in the second case are unknown to him. Consequently, the first bottle has a better chance of preserving its taste, which means its price is higher.
Cost estimation without a blockchain. You have the same two bottles of Mouton-Rothschild of 2000, but without recording the history of the origin in the blockchain network. In this case, the appraiser examines both bottles, asks about the origin and storage conditions of each of them, conducts an investigation (checks the information received) and assesses the authenticity and cost of wine.
If during the investigation it is decided that this is not a fake, the appraiser creates two entries in the blockchain and hangs identification tags on the bottles. Then you go to auction or eBay and sell wine.
SevenFifty — trade and communication platform that helps importers, manufacturers, distributors and retail buyers to communicate with each other and conduct business in the production and sale of alcoholic beverages in the
US market. SevenFifty allows manufacturers and distributors to create a portfolio with a list of products and complete, traceable history of the origin of each bottle, and customers to study the portfolio and choose from a variety of options suitable, verify the authenticity of the goods and place an order here.
Chai Vault — platform created by Maureen Downey. This is a world-class expert who not only assesses wines, but also fights against fraud in the market. On her account, the exposure of many fraudsters, including the aforementioned Rudy Kurniawan. At the heart of Chai Vault is the Everledger blockchain, which collects and stores information about the movement of wine along the sales chain.
VeChain — Chinese platform for tracking the origin of various goods and optimizing logistics. In 2017, VeChain signed a partnership agreement with French wine producer Pierre Ferraud & Fils and Chinese distributor Direct Imported Goods (DIG). Currently, 30% of all wine imported to China comes in through DIG (over 1 billion bottles).
EY Ops Chain — a set of applications and services to simplify the management of sales chains, record the history of origin and the conclusion of transactions. The project was created by consulting company EY (included in the Big Four along with Deloitte, KPMG and PwC) in collaboration with EzLab and is focused on protecting the quality of Made in Italy production and increasing market transparency. The development uses the winery LaVis.
VinX (Vinsent) — the platform created by Medici Ventures to provide wholesale and retail buyers with the opportunity to enter into futures contracts for the purchase of wine (large quantities and single bottles). That is, you can buy wine here before the grapes from which it is made are grown. Traceability of the sales chain, the ability to conclude P2P transactions and open access to information on the blockchain are also present.
CWEX (Crypto Wine Exchange) — decentralized platform for buying and selling collectible and ordinary wine for cryptocurrency. The service guarantees anonymity and security of investments by providing a certificate of ownership based on a chain of blocks for each bottle of wine sold on CWEX. The project was developed with the support of DotChain GmbH, located in Switzerland, and is at the stage of the initial offer of coins.